Chinese stocks that ended up being targeted by Beijing have been pummeled in recent weeks. But after China’s government tried to reassure companies and investors that it was not trying to decimate the country’s stocks, some on Wall Street seem to believe that the government was giving the “all-clear” sign.

But I don’t think that’s necessarily the case. As I pointed out in a July 19 column on Alibaba (NYSE:BABA), when evaluating Chinese stocks, it’s vital to realize that “the country’s rulers will pretty much do whatever they want to any company, whenever they want to do so.”

Therefore, at any time — in, for example, one month, six months or a year — Beijing could suddenly decide that the companies it targeted did not sufficiently receive the warning that it was trying to send or that one or more of the firms are once again becoming too threatening. At that point, the Chinese government could unleash measures as harsh or harsher than those it’s taken recently.

In previous articles, I’ve suggested that, in order to prevent a revolution, China’s government is trying to rein in companies that either have a tremendous amount of money, i.e., hundreds of billions of dollars or the ability to easily communicate with many tens of millions of the country’s citizens. And of course, firms with both characteristics are particularly likely to be hit by Beijing.

So I would suggest avoiding the stocks of Chinese companies with either of those attributes. And investors should stay really far away from Chinese firms with both characteristics. As for those companies in one or both categories that have already been harassed or hurt by Beijing, I would avoid their stocks entirely. That’s because the regime’s actions have already shown that’s it’s afraid of those companies.

Here are five Chinese stocks in this category:

1. Alibaba
2. Tencent (OTCMKTS:TCEHY)
3. Didi (NYSE:DIDI)
4. NetEase (NASDAQ:NTES)
5. TAL Education Group (NYSE:TAL)

Chinese Stocks to Avoid: Alibaba (BABA)

As I’ve stated previously, I believe that Alibaba’s founder and longtime former CEO, Jack Ma, triggered Beijing’s wave of repression by harshly criticizing the country’s financial system in November 2020. In the wake of that speech, I think the government began to feel vulnerable to large companies with huge amounts of cash and the ability to communicate directly with large portions of the Chinese population.

What’s to stop such companies, likely asked the Chinese Communist Party — which itself came to power through a revolution in the late 1940s — from fomenting massive uprisings in China using their money and communications apparatus?

So, beginning with Alibaba, Beijing started to send harsh messages to such firms. Specifically, among other actions, the regime vetoed an IPO by Alibaba’s fintech subsidiary, Ant Group, and fined Alibaba a hefty $2.75 billion.

As of the end of last quarter, the conglomerate has a cash hoard of $483 billion and can communicate with hundreds of millions of Chinese citizens who use its e-commerce websites.

Although the government has taken a break from hitting Alibaba in recent months, it can always go back to doing so if, for many possible reasons, it gets nervous about the company’s power again. In fact, I believe the chances of that happening, given Alibaba’s power and Ma’s rebellious statement, are well over 50%.

Tencent (TCEHY)

As of the end of the first quarter, Tencent had $226 billion of cash. The company’s WeChat, a social network, has 1.24 billion users, while its music service has over 800 million.

Beijing, however, apparently chose to target Tencent via its video game business. Tencent has a leading 43% share of China’s large video game market. A recent article published by Xinhua, part of the government’s state media, declared that video games are “spiritual opium.” Given China’s history with actual opium, this statement should be taken quite seriously.

I think that the gravity of the analogy for Chinese citizens and the fact that it appeared in an official government source suggest that Beijing is ready, willing and able to take action against video game companies in general and Tencent in particular.

While TCEHY stock is down about 20% from its July highs, it would likely tumble much further if Beijing tried to take down the company a few notches.

Chinese Stocks to Avoid: Didi (DIDI)

The ride-hailing company has been the hardest hit by Beijing’s recent crackdown. As I recounted in my July 27 article on Didi:

“Beijing forced the company to stop enrolling new customers and made the nation’s app stores delete the firm’s app. Moreover, the government sent personnel to Didi’s facilities, allegedly to carry out ‘cybersecurity reviews.’”

The company was accused by Beijing of violating privacy laws. But as I wrote in the prior piece, I doubt the Chinese government is actually very concerned about its citizens’ privacy.

Much more likely is that Didi’s refusal to heed the government’s warning to delay its June 30 IPO in New York, coupled with the usual worries about the company’s money and its large user base, prompted Beijing’s crackdown on Didi. In the wake of the IPO, Didi had $47 billion in cash. As of May, Didi had nearly 63 million monthly active users, giving it the largest user base of any ride-hailing company in China.

To calm down Beijing, Didi is reportedly considering ceding control over its user data. That step would likely satisfy the regime… for now. But the government might change its mind down the road. And if Didi doesn’t give up its data, Beijing could really go on the warpath.

With a market capitalization of nearly $45 billion, DIDI stock still has a very long way to fall.

NetEase (NTES)

The video game publisher had $99.5 billion of cash as of the end of Q1 and only $22.56 billion of debt. What’s more, NetEase doesn’t divulge the monthly active user base of its video-game business, but its music streaming unit “had 180 million monthly users at the end of 2020, making it the number two online music player in China,” Variety reported.

All of that could easily cause NetEase to become a target for Beijing in the not-too-distant future. Making such an incident more likely is the government’s recent, harsh attack on the video game sector. And with the intent of clipping Tencent’s wings, the regime could decide to crack down on the video game sector, causing NetEase to become collateral damage.

Chinese Stocks to Avoid: TAL Education Group (TAL)

At the end of last month, Beijing began cracking down hard on private education companies, including TAL Education Group.

Under the regime’s decrees, the companies in the sector cannot raise money by selling stock or obtain any funds from overseas investors. What’s more, the government ordered private education firms to become non-profits, and a number of municipalities closed all private classes for students between kindergarten and ninth grade.

Beijing’s fears of these companies make sense. Although they do not have a great deal of money (TAL has just under $6 billion in cash), they do have the ability to influence many young, impressionable minds. The Chinese Communist Party could realistically fear that these companies, if they come under the influence of foreign investors and foreign governments, may meaningfully undermine the regime.

As a result, it seems that the government has already made the decision to clamp down extremely hard on companies in the sector and potentially take them over entirely.

Despite its recent plunge, TAL stock still has a very substantial market capitalization of over $3.9 billion, meaning that it can tumble much further.

Although I did not include it on this list, the shares of another Chinese private education company, New Oriental Education & Technology (NYSE:EDU), should also be avoided for the same reasons that I outlined above.

On the date of publication, Larry Ramer did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.